Drought reduces expectations of agricultural GDP growth in 2021, says Ipea | Agribusiness

The Institute of Applied Economic Research (Ipea) cut from 2.6% to 1.7% the expected growth of the Gross Domestic Product (GDP) of agriculture, this Thursday (26).

More severe impacts in this crop of the La Niña phenomenon, such as drought in the Midwest and Southeast, and worsening of the cattle production scenario contributed to the drop in the estimate, released during a webinar in partnership with the National Supply Company (Conab).

Only for agricultural production, the projection dropped from 2.7% to 1.7%, driven by: corn (-11.3%), sugarcane (-3.2%) and coffee (-21.0%).

On the other hand, soy (+9.8%), wheat (+36.0%) and rice (+4.1%) should be increased.

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Corn yields in 2021, in particular, were greatly affected by the delay in the soybean harvest, which delayed the planting of the second crop, becoming dependent on late rains that did not occur.

For animal production, the bullish forecast was revised from 2.5% to 1.8%, with growth for all segments, with except for the production of cattle, with a decrease of 1.0%.

There is an expectation of positive performance in the production of other proteins: pork (+7.7%), chicken (+3.9%), milk (+3.1%) and eggs (+4.5%). In the case of pork, the good performance is related to the strong growth in exports to China this year.

For 2022, researchers from Ipea estimate an increase of 3.3% in the sector’s GDP, with growth of 3.9% in vegetable production and 1.8% in animal production.

According to Conab, there is an expectation of maintaining the good performance in soy production, which should set a new record in 2022, and good recovery of crops such as corn and cotton, after the sharp drop projected for this year.

Also, the cattle slaughter should, finally, register recovery after two consecutive years of decline.

“We expect a recovery in the supply of cattle next year, with enough time having passed for the herd to recompose after the peak in 2019”, added Pedro Garcia, an associate researcher at Ipea and one of the authors of the note.

You main risks of the growth projection, however, are related to the climate effects on agricultural production and to delay in resuming cattle slaughter.

“However, climate models point to a milder La Niña phenomenon in the second half of the year, with more regular rainfall in summer crops and milder temperatures in winter,” says Ipea.

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